THE BIG PICTURE
In a losing race with the zeitgeist
The era of moviegoing as a mass audience ritual is slowly but inexorably drawing to a close.
Patrick Goldstein
The Big Picture

November 22, 2005

Showbiz people are prone to exaggeration, but when everybody is exaggerating about the same thing, you know something bad is happening. There's a dark cloud of unease hovering over Hollywood. A top CAA agent calls it "mayhem." A studio marketer says "it feels like Armageddon." A production chief puts it this way: "Each weekend there's more blood in the water."

Malcolm Gladwell might call it a tipping point.

The era of moviegoing as a mass audience ritual is slowly but inexorably drawing to a close, eroded by many of the same forces that have eviscerated the music industry, decimated network TV and, yes, are clobbering the newspaper business. Put simply, an explosion of new technology - the Internet, DVDs, video games, downloading, cellphones and iPods - now offers more compelling diversion than 90% of the movies in theaters, the exceptions being "Harry Potter"-style must-see events or the occasional youth-oriented comedy or thriller.

Anywhere you look, the news has been grim. Disney just reported a $313-million loss for films and DVDs in its fiscal fourth quarter. Sony has had a disastrous year, with only one $100-million hit ("Hitch") among a string of costly flops. DreamWorks not only has had theatrical duds but also saw its stock plummet when its "Shrek 2" DVD sales fell 5 million short of expectations. Even Warners, the industry's best-run studio, laid off 400 staffers earlier this month.

Although the media have focused on the economic issues behind this slump, the problem is cultural too. It's become cool to dismiss movies as awful. Wherever I go, teenagers say, with chillingly casual adolescent contempt, that movies suck and cost too much - the same stance they took about CDs when the music business went into free fall. When MPAA chief Dan Glickman goes to colleges, preaching his anti-piracy gospel, kids hiss, telling him his efforts don't help the public, only a few rich media giants. Say what you will about their logic, but, as anyone in the music business can attest, those sneers are the deadly sign of a truly disgruntled consumer.

There are still optimists who say the sky isn't falling, who insist that a few hits will turn things around, or gas prices will come down, or that the business being off 7% this year has more to do with the absence of a left-field sensation such as "The Passion of the Christ" than a long-term decline in moviegoing.

To them, I say - go ye to Costco or Best Buy and watch the giant HDTVs zooming out the door, the TVs that used to cost $7500 that now go for $1995 and allow middle-class people to have a marvelous moviegoing experience right at home without $10.50 tickets, $4 popcorn, 20 minutes of annoying commercials and some guy in the next row yakking away on his cellphone.

Once people spend all that money on a home entertainment system, they've got to feed the machine. I've watched friends who used to regularly go to theaters mutate into adjunct professors in DVD-ology, scanning the ads for the new video releases and rhapsodizing over Netflix the way other people swoon over TiVo or XM radio.

This only highlights the biggest crack in the system: that most of the movies in theaters don't deserve a theatrical release, at least not by the rules of today's game. Until the DVD and pay TV money kicks in, they're money losers. Yet the studios are forced to spend more marketing money every year to chase after increasingly resistant moviegoers, then go dark for months before spending another big chunk to remind people the DVD has arrived.

The studios have no one but themselves to blame. Motivated, as always, by an obsession with quarterly earnings, they began shrinking the DVD window from nine months to six months to 90 days. Universal's "The Skeleton Key," which opened in theaters in mid-August, made its DVD debut last week, barely three months later. When the six-month window still held sway, the theater beckoned - half a year felt like a long time away. Three months seems like just around the corner. All too many movies, even ones with big stars in them, including "The Weather Man," "In Her Shoes" and "Dreamer," have died on the vine, with millions of Americans staring at the TV spots and thinking, "I'll wait and see that on DVD."

And that's just the adult side of the equation. What's really driving the studio folks crazy is that a huge chunk of their core constituency - young moviegoers - has evaporated. Poof! They've scattered to the winds. Young males aren't just AWOL from movie theaters, they're also not seeing the studio's TV ads - either because they've stopped watching TV altogether, or because they've got the TV, iPod and IM all going at the same time - not exactly a situation in which an ad leaves much of an imprint. The only movies that are reliable drawing cards today are behemoths such as "War of the Worlds" or "Harry Potter," or cheap youth-oriented genre films such as "Saw II" or "The 40 Year-Old Virgin."

One of the movie industry's crucial failings is that it's simply too slow to keep up with the lightning speed of new technology. Who would've believed six months ago that the day after "Desperate Housewives" aired on ABC you could download the whole show on your video iPod? But when someone pitches a movie, it takes at least 18 to 24 months - if not far longer - between conception and delivery to the movie theaters. In a world now dominated by the Internet, studios are at a huge disadvantage in terms of ever lassoing the zeitgeist. Everybody is making movies based on video games, but it seems clear from the abject failure of movies such as "Doom" that it's almost impossible, given the slow pace of filmmaking, to launch a video game movie before the game has started to lose its sizzle.

New technology is also accelerating word of mouth. Thanks to instant messaging and BlackBerries, bad buzz about a bad movie hits the streets fast enough to stop suckers from lining up to see a new stinker. Even worse, the people who run studios are living in such cocoons that they've become wildly out of touch with reality.

That's the only explanation for why Sony Pictures could've imagined there was any compelling reason this summer to see a wan remake of "Bewitched." Or why any of the studio's highly paid executives didn't wonder why it should shoehorn an obscure family movie into the one-week window between the Disney-powered "Chicken Little" and the latest "Harry Potter" juggernaut, especially when the movie, "Zathura," has a title that sounds like it should be followed by the warning "side effects may include leakage or sexual dysfunction."

The ultimate perk of being a studio chief is having your own screening room, which puts only more distance between you and the rabble - ahem, your customers - who spend $75 to take the family to a movie. Too often studio people have the same ideas about the same things, a groupthink that has led to them anointing one Hot New Thing after another, from Josh Hartnett to Brittany Murphy to Kate Hudson to Colin Farrell, who've yet to connect with rank 'n file filmgoers.

What should studios do to come to grips with this new era? In a world bursting at the seams with new technology, it's hard to justify the antiquated idea of studio development, which keeps churning out movies such as "Be Cool," an Elmore Leonard novel from 1999 that was hilariously out of date by the time it reached theaters, having a storyline that revolved around Chili Palmer's exploits in the music business, perhaps the least cool place on the planet.

Hollywood needs a new mindset, one that sees a movie as something that comes in all shapes and sizes, not something that is wedded to the big screen. Studios have to do what record companies refused to do until they nearly went out of business: embrace the future.

People increasingly want to see movies on their terms, today on a big TV at home, tomorrow on an iPod or cellphone. It breaks my heart that people have fallen out of love with movie theaters, but if I were king, I'd start releasing any movie with multi-generational appeal on DVD at the same time it hit theaters, so the kids could get out of the house and the parents could watch at home.

The music business has already adopted this two-tier system, selling downloads and CDs simultaneously. TV networks are starting to do the same thing with their shows. It's only a matter of time before movies are forced to do the same. The day isn't far away - desperation being a great motivator for innovation - when a studio opens a blockbuster on Friday in theaters and on Saturday on pay-per-view (at $75 a shot) so fans could watch it with a bunch of friends at home.

As it stands, Hollywood has become a prisoner of a corporate mindset that is squeezing the entrepreneurial vitality out of the system. It's not just that studios are making bad movies - they've been doing that for years. They've lost touch with any real cultural creativity. When you walk down the corridors at Apple or a video game company, there's an electricity in the air that encourages people into believing they could dream up a new idea that could blow somebody's mind.

At the big studios, the creative voltage is sometimes so low that you wonder if you've wandered into an insurance office. The dreamers have left the building. Back in the 1950s, David Selznick, out walking one night with Ben Hecht, glumly said, "Hollywood's like Egypt, full of crumbling pyramids. It'll just keep on crumbling until finally the wind blows the last studio prop across the sands." As I said, show people like to exaggerate, but these days when I go around Hollywood, I can see the crumbling pyramids too.

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When exactly is it that the "movies" are to die? After radio, television, or internal combustion engine?
Wait, they did get one of them right, we don't use the telegraph much anymore! The theatrical exhibition industry is still one of the largest entertainment revenue producers going. If Disney or any other "studio" feels that the smart thing for them to do is carve out a niche in web, I-pod, DVD sales, then I hope they enjoy competing in the world of small-segment specialized programming, along with the Food Network and Speed Channel. New studios will form and create product for theatres. The theatres have a role too, they need to get back to some luxury and panache. People don't want to stay at home, and who ever rented a movie that hadn't played in theatres? Get rid of the damn accountants already, this ain't gonna work, you don't fix what isn't broken. A 7% decline after a year of record increase is NOT a problem.

I feel there are words of truth in the article, but, on the other hand, I see the exhibition industry as somewhat of a dinosaur that is very slow to make changes, even when changes are bombarding them in a helluva hurry. I think the revenues at studios are going to continue to fall until the accountants that are in charge force their studios to change. The question is what will it change into. I do NOT forsee the end of movies, but, having said that, they are going tohave to change from the standard crapola we see today. They have to innovate, or they will die. Yes, the movies have been crappy lately. But, looking back, there have been LOTS of crappy movies year after year. Week after week this year, it wasn't just that the movies were doing 7% less then they were last year, it was that virtually all of them were vastly underperforming the studios expectations. Sure, there were some hits, and a few positive suprises, but, by and large, the movies underperformed opening weekend and then fell off the edge of the world within three weeks. This trend has to do with the way society has speeded up. The movie industry it seems, is very slow to catch on to these trends, or worse yet, don't know what to do about it. I don't pretend to know the answer, but I think the sooner we gravitate to digital cinema the better. Once digital cinema hits, it will shake the industry up, and this is an industry that needs some shaking!

Chicken litttle Quote" The Sky Is falling, The Sky Is Falling". Look at the numbers for Harry Potter. The world overall is going through tough times. DVD sales and Video sale at the local lockbusters are also falling.
Once the economy comes back people will satrt goingback. I mean look at the 70's movies were the worst but the theatre survived. No matter what people say aout high prices it is till the cheapest form of family entertainment. Try going to a baseball stadium, cirucs, ice show, Play for 50.00 for a family of 4.
The focus should be on planning more family movies that is were the money is. No matter how bad the movies is the kids come and spend on concessions.

I don't know what 70s movies you're referring to, but I could EASILY make a list of 70s movies which would blow the doors off the batch of crap they've been churning out for the last decade... What we REALLY need is some DIVERSITY in the films, based on intended audience, content, and storyline... EVERY picture can't be made for the kiddie market, the "family" market, or the mall rat market... There are still a few intelligent ticket buyers left on the planet who can't find a clever, well done GENERAL AUDIENCE picture to buy a ticket to... Likewise, there is still an audience for westerns, adventures, thrillers, cop pictures, romance pictures, witty comedies, and even an occasional musical, IF they are done well with a DECENT cast and STORY... They don't ALL have to be made for a fifth grade intelligence level, with computer enhanced car chases and explosions... Make 'em FOR theaters, show 'em IN theaters (long enough to generate some legs) THEN after they've played out in theaters, release 'em on DVD, etc... They don't HAVE to generate 60%-75% of their theatrical revenue the first week-end, there are 51 MORE weeks in every year... It's all geared to who can grab the most bucks the fastest, no wonder the public forgets 'em faster than they can release 'em... Time for a little COMMON SENSE to show up in how things are done!...

The lawsuit, filed on Thursday by Congregation Ezra Sholom in a Texas federal court, says Viacom, as controlling shareholder, caused Blockbuster to go $1.1 billion into debt to pay a $5 per share special dividend in September 2004. The dividend resulted in a cash payment of $738 million to Viacom, which had announced earlier in the year that it wanted to divest its 81.5 percent stake in Blockbuster.

The lawsuit says Blockbuster's resulting debt obligations prevented the company from transforming the store-based chain into an online and store-based hybrid that could compete with DVD Web-rental pioneer Netflix Inc. (NFLX.O: Quote, Profile, Research).

"Blockbuster was wholly unprepared to build the technological infrastructure required to integrate its in-store and online sales operations and otherwise execute the company's transformation," the lawsuit said.

A Blockbuster spokesman said the company would defend itself vigorously against the lawsuit, which also names several board members from both companies as defendants.

A Viacom spokesman could not be reached for comment.

Investors who held Blockbuster shares from September 8, 2004 to August 9, 2005 are eligible to become plaintiffs in the proposed class action.

Blockbuster has amended the terms of its debt covenants three times in the past year to stay in compliance with the debt-to-earnings ratios mandated by the agreements.

In the fourth quarter, Blockbuster's share price dropped 48 percent as its financial troubles mounted. Blockbuster shares on Monday closed at a six-year low of $3.97 on the New York Stock Exchange.
S&P cuts Blockbuster's debt ratings

The company has performed poorly due to industry fundamentals, the company's decision not to charge late fees and the costs associated with its in-store and online subscription programs, S&P said.

S&P cut Blockbuster's corporate credit and bank loan rating to "B-minus," the sixth-highest junk rating, from "B." The ratings agency also cut its subordinated note rating to "CCC" from "CCC-plus."

Ratings downgrades can increase a company's borrowing costs. The outlook on the ratings are negative.
Blockbuster fighting to stay out of debt, in game
By DAVID LIEBERMAN (Gannett News Service)

NEW YORK â€” Blockbuster launched a major campaign Tuesday to raise cash and slash costs to avoid defaulting on its loans, which could lead it to file for bankruptcy protection.

The company outlined its plan to quickly sell as much as $173 million in convertible preferred stock. Blockbuster says lenders agreed last week to relax loan terms through 2007 if it repays at least $100 million by Nov. 20. If Blockbuster fails, it is â€œprobableâ€ it will default on its loan covenants on Dec. 31, it said in a Securities and Exchange Commission filing.

The company also said it will cut costs by $100 million next year, cut capital spending by $90 million and sell non-core assets. â€œWe'll continue to move full steam ahead with our core business, which is Blockbuster stores and Blockbuster Online,â€ CEO John Antioco said.

Analysts were cautiously optimistic. If Blockbuster offers 7.25 percent interest on the preferred stock, then, â€œPeople will be interested,â€ says Research Associates analyst Marla Backer. â€œHaving outlined their cost slashing, they've made a strong case to get it done.â€

Still, many remain concerned as Blockbuster struggles with an industrywide slump in movie rentals and online rivals such as Netflix.

Revenue fell 1.7 percent in the third quarter, vs. the same period last year, to $1.39 billion. It had a net loss of $491 million, including a $348 million write-down on the value of its assets. Last year, it lost $1.41 billion after a $1.42 billion write-down.

Executives say that the decision to cut marketing costs left their new Blockbuster Online venture with 1 million subscribers â€” flat with the second quarter.

They say the results would have been worse had they not eliminated late fees early this year. â€œYes, we gave up revenue from late fees, but we gained productive revenueâ€ from increased store traffic, Blockbuster North America President Nick Shepherd says.

The company restated results from previous years.

PricewaterhouseCoopers noted in the SEC filings that Blockbuster management â€œdid not maintain effective internal control over financial reportingâ€ at the end of 2004.

This is what happens when these industries are run by bean-counters based on share price. They leverage everything right to the max, no room for error, downturn, or small dip in sales. One problem is they seem to always project revenue as constant or better. They cut staff and expenses to the bone. There's no room for error. Theatres, grocery stores, department stores. Time and time again, downturn - bankrupt - restructuring - sale or merger. It doesn't work, never will work. A business will always ebb and flow and needs people who know and understand that in control. That's why 50% of the workforce is employed by SMALL business, the people who don't "bet the farm" on EVERY quarterly statement.

I am starting to research what eroded the Drive-In's 20 years ago. Besides the real estate factor of those that sold out because the land they were sitting on just became too valuable to hold onto and not sell.

There were many similiar problems back then. High gas prices, higher interest, higher inflation, job losses and so on.

There were good movies and duds. With a handful of blockbusters each year. Also there was a cultural shift. Where the new Mall's were becoming the new town center or downtown. And movie theatre's were starting to be built in them or next to them. Video VHS players were starting to become affordable for the average family.

Something or a combination of things redirected the focus of the consumer away from drive-in's. Was it the cultural shift and the new technology advances in home entertainment that did it? Are theatre's facing the same thing again? How do we put our finger on it to try and get the consumer to refocus on theatre's, besides the "Event" releases like Star Wars and Harry Potter?

The good news for the drive-in's is, they are in an upswing the past couple of years. But many went out of business before they got to the point they are at today....

Can we learn a lesson from the drive-in's experience and try to nip it in time. Or is it just beyond us....

I remember reading six months ago that Wal-Mart was going to start building new stores really fancy to encourage shopping. I think that kind of says that blandsville doesn't work.

Multiplexes must cost a fortune to maintain/operate.

So, why not go BIGGER on a smaller scale? How about an 8 plex instead of a 24 plex, and instead of 2 or 300 seats in each one, have about 5 or 6 or 700 seats. It adds up to the same thing: 3 screens of Harry Potter with 200 seats each; Just, this time the shows start at the same time, you're running less xenons and there's a lot more traffic at once... but doesn't that bring in all the concession sales at once? Isn't that the quickest way to a buck?

With 700 seats, you could also say: "Guaranteed seats to Harry Potter or your ticket is free next time!" Your disclaimer could be that membership has to be purchased to qualify.

And speaking of blandsville: Lighting can be a key part of making or breaking a space, so why not put nice halogen lights in, cove lighting, soft colours, etc.

Since why do typical teens need to be the ones theatres are built towards? Obviously this age group does't have the purchasing power they used to, but kids ALWAYS bring in huge concession sales, so why not build an upper class place for families?
"Would you like fries with that?"

Sevstar, I've been researching drive-ins for a number of years, nearly buying a couple. Yes, they do seem to buck the trend. I've never found rhyme or reason as to the survivors. Lack of access to good product was a factor in the 70's/80's as was aging owners, but by far and away land values (be it the temptation to sell out OR municipalities who unfairly raise taxes based on surrounding land use) doomed many. Some theatres that may have wanted to relocate could not as the suitable land for the business was now subject to restrictive zoning policy, making the whole venture unworkable.

My theory as to why drive-ins seem to now be busier than ever (sometimes well off release) is that the experience is still the same as it was, a family outing. And some of these places are just immaculate, they have character and feel like "your own" much like many of the indoors that participate on this board. Double-features are a draw, even in a number of weeks after release, they are still more mainstream than the "old days". People I talk to are willing to wait until it comes and many make it a regular thing. 3 or 4 good family pictures combined with rotating second feature for the parents bring people back again and again.

"The ultimate perk of being a studio chief is having your own screening room, which puts only more distance between you and the rabble... Too often studio people have the same ideas about the same things, a groupthink that has led to them anointing one Hot New Thing after another, from Josh Hartnett to Brittany Murphy to Kate Hudson to Colin Farrell, who've yet to connect with rank 'n file filmgoers."

Aside from the names of the Hot New Thing of the moment, how is any of this different from the Hollywood of Jack Warner or Sam Goldwyn?

It's been mentioned on these forums before, but other forms of entertainment are taking a bite out of the film exhibition business, just as television did. We know that. It's possible that in the future, many people will prefer to stay home and download movies to their 50" TV sets.

But movie theaters won't disappear. IMHO, in the long run this trend will harm the big chains a lot more than the independent cinemas. Because the people who will keep going to movie theaters are the ones who love the experience of going to the movies, and the megaplexes can't offer that experience. Not really.

Megaplexes run their theaters like stockyards. They hold their customers in contempt. For them the show doesn't start on the sidewalk, it begins and ends with the rolling-stock ads. Recently I sat through eight -- eight! -- rolling stock ads at a big chain megaplex. I'm sure the owner didn't hear the snarls and curses from the patrons around me as one after another after another TV commercial came on the screen. I'm sure the owner lived a thousand miles away and never visited the theater. Why would he care, anyway?

The only thing keeping the megaplexes alive is the stigma that direct-to-video release has. But that stigma is evaporating. As soon as people can download new releases to their home televisions, they'll do it, and the megaplexes will be finished. But the smaller cinemas, the ones that can offer more than just the movie itself, they will be okay.

Someone here on the forums compared the movies to jazz music. In the 40's and 50's jazz was music for the masses. Today it's a niche art form. But it didn't disappear completely and it won't. Same with film exhibition.

This is all well and good, but we, smaller independent cinemas need the megaplexes to survie so that we can survive. If the only viable market in exhibition is us small independents then there will surely be an end to motion picture cinema as we know it today. Maybe it will morph into something else entirely (I really doubt there will be no market whatsoever) but it will indeed change radically without the chains. The ramifications of what you're suggesting are much deeper then us and them....

Maybe Andrew is right because in the country that I am in the huge cinema chain is also the supplier. If the supplier isn't making money out of the cinemas and he closes them then the supplier will just go straight to videe/dvd so in some way we need the chains to help make cinema exhibition feasible to the distributors.